HM Insights

Business interruption insurance - businesses entitled to compensation?

The decision in the High Court is out!  It has been decided that the majority of businesses that held business interruption insurance and were forced to close as a result of Covid-19 could be entitled to be compensated by the insurers involved, subject to appeal.

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In particular, the court found in favour of the FCA in respect of coverage triggers under most disease and ‘hybrid’ clauses. The Court noted that Insurers should also consider the detailed wording of the clause and how the individual businesses were affected by the Government response to the pandemic, whether they were subject to a mandatory closure order and if they were closed completely. 

Christopher Woolard, interim chief executive of the FCA said that the test case was raised "in order to resolve the lack of clarity and certainty that existed for many policyholders making business interruption claims and the wider market." He added that the ruling is a "significant step in resolving the uncertainty" as "today’s judgment removes a large number of those roadblocks to successful claims, as well as clarifying those that may not be successful."

The Insurers can appeal against this decision, however we expect in the first instance they will be in contact with policyholders who have made claims affected by the judgment to explain their next steps to help both business and individual customers through this unprecedented situation, in which the industry expects to pay out over £1.7bn.

Huw Evans, director general of the Association of British Insurers said: “Insurers have supported this fast-track court process led by the FCA to help bring clarity for customers and we welcome the speed with which the court has delivered a ruling."

As we now have the High Court's decision, we will wait to see if the Insurers intend to lodge an appeal with the Supreme Court – watch this space!